Warren unveils details of plan to cancel $640B in student loan debt

Democratic 2020 candidate Sen. Elizabeth Warren on Tuesday disclosed the details of her promise to cancel approximately $640 billion of student loan debt, targeted at lower and middle-income earners.

Warren introduced the bill — dubbed The Student Loan Debt Relief Act — along with Rep. Jim Clyburn, the No. 3 House Democrat, who is sponsoring a companion measure in that chamber. Clyburn said he's committed to seeing the measure get floor debate sometime this fall, although he has not yet discussed it with House leaders.

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“Student loan debt in this nation has reached crisis proportions,” Warren (D-Mass.) said at an afternoon press conference with Clyburn. The more than $1.5 trillion of outstanding debt, she said, “is a drag on our entire economy” as loan borrowers delay or forgo economic activity such as buying a house or starting a business.

Warren’s plan, first announced in April, calls for canceling up to $50,000 of debt for all borrowers earning less than $100,000, with proportionally less debt relief for those earning up to $250,000.

The legislation introduced Tuesday outlines a process by which the federal government would automatically cancel most student loans without requiring borrowers to submit applications. The Education Department would use existing income and debt information to determine who qualifies.

Warren's measure follows a competing bill released earlier this year by her presidential campaign opponent, Sen. Bernie Sanders (I-Vt.). His plan would go further in eliminating all outstanding student loan debt, regardless of a borrower’s income.

Sanders unveiled his legislation last month alongside Reps. Pramila Jayapal (D-Wash.), Ilhan Omar (D-Minn.) and Alexandria Ocasio-Cortez (D-N.Y.), who are among the co-sponsors to a companion measure in the House. They argue that it’s important to create universally available government benefits — like loan forgiveness for all — to ensure lasting political support.

Warren said on Tuesday that her student debt plan included income limits because it’s meant to be targeted “directly at bringing down the black-white wealth gap in America.”

“The numbers we picked are the numbers that do that best,” she said. “They give the maximum help to the people who will help close that black-white wealth gap.”

Clyburn also rejected a more universal approach, saying he opposed the idea of “opening the door and saying, ‘Everybody, you’re free to come in,’” when the plan is meant to address racial wealth gaps created by years of discrimination.

“I get a little bit concerned when I see attempts being made to address a specific issue and the attempts get diluted by bringing everyone into the process,” Clyburn said, adding that “if the money were unlimited that would be one thing, but it’s not.”

Republicans and even more moderate Democratic critics of the debt relief plans have expressed concerns about the massive cost of forgiving student loans outright.

The bill released on Tuesday does not contain any offset for the $640 billion in student debt relief. Clyburn said he would like to pay for the bill by reversing some of the tax breaks for higher-income individuals and corporations in the GOP tax law.

Warren has also proposed the plan with a 2 percent “wealth tax” on individuals with a net worth above $50 million. That’s a tax that she says would raise enough money to also fund her various other proposals like debt-free college and universal pre-K.

With no chance of the bill moving in a GOP-controlled Senate, Warren said she thought there was an opportunity to “work it through the House so we can iron out any kinks and get it ready” if Democrats take control of Congress and the White House in 2020.

It’s not clear whether House Democratic leaders would hold a vote on either the Warren or Sanders-led loan forgiveness messaging bills this year.

Clyburn, the House majority whip, told reporters he intends to get the legislation on the House floor. Although he hasn’t discussed the bill personally with House Speaker Nancy Pelosi, he said, their respective staffs have been working on the issue.

“This is something we’ve got to do,” Clyburn said. “I would like to do it some time after Labor Day.”

Beyond the direct cancellation of a large chunk of outstanding federal student loans, the Warren-Clyburn legislation also includes other provisions meant to ease loan repayment.

Private student loan borrowers would be eligible for debt relief under the bill by refinancing their private debt into federal student loans. The legislation also calls for lowering the interest rate on all existing federal student loans.

Under the plan, the federal government would suspend the collection of student loan payments for a year while the Education Department carries out the loan forgiveness program.

Warren’s bill would also make it easier to discharge both private and federal student loans in bankruptcy. The legislation would undo provisions in the bankruptcy code that prohibit the discharge of student loans except where debtors present an “undue hardship.”

Warren’s 2020 rival, former Vice President Joe Biden, supported and helped pass those restrictions on discharging student loans in bankruptcy during his time in the Senate. The Obama administration in 2015 recommended that Congress ease the bankruptcy restrictions on private, but not federal, loans.